SAN JOSE – Young buyers are willing to make more sacrifices to buy a home – like drawing from retirement savings, delaying starting a family and living in lower-cost or faraway neighborhoods for the chance to build equity, according to a new study.
The survey by Clever Real Estate of 1,000 adults looking to buy a home in 2020 found greater desperation among young buyers than a previous survey – although few seemed ready to pay the high prices required to purchase a home.
“They’re a little more willing to put up with things, like higher interest rates or a less desirable neighborhood,” said Clever Real Estate researcher Francesca Ortegren. “They’re less likely to have deal breakers than older buyers.”
Higher prices, greater financial burdens like student debt and longer struggles to establish a career have pushed back home ownership for millennials.
The Clever Real Estate survey suggested a growing pessimism among millennials, defined as being between 19 and 35 years old. Their belief that home ownership is part of the American dream dropped from 84 to 70% in the last year. About 45% said they were stressed and anxious about a home purchase – far higher than baby boomers (56 and older) and Generation Xers (36 to 55 years old).
The median home price in the U.S. is $310,000, but millennials are searching for more affordable starter home around $210,000, according to the survey. A large majority are unlikely to make the recommended down payment of 20 percent, and they are much more prone to receive family help with an initial payment.
Among the challenges faced by young home buyers in the survey:
– More than 1 in 4 planning to buy this year have less than $1,000 in savings;
– About 1 in 4 owe more than $10,000 in debt, through student loans or credit cards, yet still expect to spend more than $200,000 on a home;
– Roughly 7 in 10 expect to have a down payment of less than 20 percent, the recommended amount. They also say saving up for a down payment is the biggest hurdle to owning a home.
Millennial home buyers are also more willing to take another job or ask family members for help on the initial payment.
While millennials struggle, older generations have found it easier to navigate the home buying experience, according to Clever. It makes sense: while 80% of millennial buyers were planning their first purchase, most older home shoppers had been through the process at least once, if not more.
By Louis Hansen, The Mercury News (TNS)